Yesterday Microsoft announced it would acquire Mojang along with its massive Minecraft gaming franchise for $2.5 billion. By now we've all seen the coverage, including the gratuitous interviews with middle-schoolers about whether Microsoft is "cool" enough to own Minecraft. By and large, we think this is a good acquisition for Microsoft, and we said as much in our Quick Take, just published this afternoon, summarizing the acquisition, its benefits, and its challenges for Forrester clients. Go to the report to read the client-only details of our analysis: "Quick Take: Microsoft Mines Minecraft for the Future of Interactive Entertainment." As we explain in the report, there are specific challenges Microsoft will face that will determine whether this ends up being a sensible acquisition or a sensational one.
Beyond the detailed analysis of the report, it's worth exploring the long-term question of what that sensational outcome would look like. The difference turns on the question of whether Microsoft is ready to invest in the future of digital interactive entertainment. This is a subtle point that has been missed in most analysis of the acquisition. Most people insist on covering the purchase as a gaming industry event. Microsoft, the owner of the Xbox, buys Minecraft, a huge gaming franchise. But that low-level analysis misses a bigger picture that I sincerely hope Microsoft is actively aware of.
This week, Apple confirmed the longstanding rumors that the company has agreed to acquire PrimeSense, the Israeli company that invented the technology behind the original Kinect for Xbox 360. All of Apple's moves are scrutinized closely, but this one is worth paying closer attention to than most.
The PrimeSense technology was astounding when it was first incorporated into the Kinect. This was not only because of what it could do — see you in 3D and model your skeletal structure as it observed you moving in physical space — but also because of how the company did it. Instead of imitating the $10,000 military-grade hardware of its predecessors, the company insisted on using off-the-shelf technology, whether hardware or software, so that the cost to deploy the solution would be laughably low, compared with prior imaging solutions. That's what made Microsoft so interested — Microsoft's own motion-sensing engineering group was years away from a homegrown Kinect experience and saw a chance to jump ahead of the market with PrimeSense. And jump it did, selling by our estimate more than 30 million cameras around the world, boosting sales of the Xbox 360 console even after it was already nearly five years old.
Now that Microsoft has moved beyond PrimeSense with the Xbox One and Apple has swooped in to buy the company, it will be tempting to think that Apple wants the technology so that it can finally make a successful play for the living room, something it has repeatedly failed to do with Apple TV. Certainly, the Primesense tech works great in the living room, and Apple would be foolish not to try it out there.
Folks, this one is going to be short because it's the easiest case I've ever made. Microsoft wins the next-gen game console launch wars by launching something that the company doesn't even call a console. Where Nintendo offered us a tablet to accompany the millions we had already bought and Sony then offered us a box that we couldn't even see, Microsoft has trumped them both by delivering the Xbox One. Let's tally up the points:
The name. Wii U means something, I'm sure, to someone. PS4 means "we like the past and want to extend it." Xbox One takes a bolder and more important stand by saying, "It's time to reboot the whole category." This is beautifully illustrated in the way that the Xbox presenters never referred to Xbox One as a game console. It is an All In One Home Entertainment System.
The reveal. PS4 famously flopped its launch by hiding the console entirely. That would have been fine last generation, maybe. But this generation comes in the post-Steve Jobs era where the device and its price are shown. Microsoft debuted the box, the new Kinect, and the new controller in the first 60 seconds of the event.
The scope. Wii U and PS4 both promise to provide access to video and other interesting media experiences. Xbox One actually delivers those things in the most satisfying and complete way anyone other than TiVo has done so far, letting you switch from gaming to TV to movies to web browsing with simple voice commands and practically no waiting.
After traveling 5,000 miles in three days to speak about digital disruption (I know, it's odd that my physical body has to go somewhere to talk about being more digitally disruptive), I fell asleep on a train yesterday and missed one of the most noteworthy events of the week: Amazon acquired Goodreads.
Full disclosure on this one up front: Amazon published my recent book, Digital Disruption. At the same time, I am a Goodreads member for more than five years; in fact, if you have read any of the most-liked reviews of the Twilight books on Amazon, chances are good you've read mine. That is to say that I am not exactly neutral on this one. But I'll do my best to be objective in answering all the anger being expressed on Twitter and in the trades when I point out that Goodreads was not saving itself for Amazon like some virginal tribute. It has been sitting there, all along, waiting for the right offer to come along. That's how venture capital works, people.
That's not to dismiss altogether the reactions I'm seeing, which range from Amazon wants to own the whole world (and to be fair, maybe it does) to How could Goodreads do this to us. But among all the hurt feelings and handwringing about the fall of publishing and the eventual reign of cohabitating cats and dogs (oh, I do hope you get that reference), I have an important question to ask, one that I am stealing from author Nick Harkaway (@Harkaway) who wrote this on Twitter the morning after:
Product strategists in many industries (from CPG to consumer electronics to financial services) share a challenge with their marketing colleagues: how to leverage the power of brand. Product strategists have a number of strategic tools in their toolboxes for differentiating their products from competitors’ offerings: features (a different taste, a new technical capability, or a higher interest rate, for instance); channel, price, or brand (or based on some combination of these factors). For the moment, let’s think about brand, because some product strategists design and build their products based largely on the promise implied by their brand name.
Forrester’s new research report– leveraging a multi-year analysis of Consumer Technographics® data – shows that while brand is important, brand loyalty (defined as the propensity to repurchase a brand) has been waning. The new report, entitled “Brand Loyalty Isn’t Enough For Products Anymore,” reveals that:
· Brand loyalty is on the decline. Brand loyalty dropped in the U.S. from 2006 to 2010, our data shows. One reason? The Great Recession. Another? The strength of brands themselves: competing brands in the marketplace entice consumers to try new brands.
The future is here, folks, and the gaming industry is the first to get us there. Today I leave E3, the gaming industry's biggest US convention. When all is said and done, roughly 45,000 people will have come through LA's convention center -- most of them as nerdy as you're imagining right now -- to play the newest games, demo the latest hardware, and collectively drool over hyper-realistic zombies, aliens, robots, and other baddies game designers have placed in our digital sights.
At this E3 we have witnessed more advances in living room technology than the cable, consumer electronics, or the computer industry (yes, that includes Apple) have managed to pull off in many years of trying. Let me summarize: